Strong quarterly results from financial institutions should give stock markets confidence. Instead, markets reacted to JP Morgan’s 21% revenue growth Y/Y to $39.87 billion with a yawn.
JPMorgan stock added only 1.5% on Oct. 13. It booked just $1.4 billion in provision for credit losses. Assets under management grew by 22% to $3.2 trillion.
On the conference call, the firm warned that the current levels of investment banking remain depressed. Still, it believes the bank will recover to pre-pandemic levels. The current environment is complicated. The firm will need to overcome some headwinds. JP Morgan’s banking team is somewhat optimistic compared to last quarter.
To win back investor confidence, the bank needs higher volumes of merger and acquisition announcements. It will need to work past regulatory headwinds that slow its growth potential.
Looking ahead, JP Morgan’s economists believe that there is a risk of a mild recession. Assume two quarters of negative 0.5% of GDP growth in Q4/23 and Q1/2024. This will limit business opportunities and deals for the firm.
The market’s weak reaction to JPM stock and a failure to rally sharply is a bearish sign. Expect limited upside in this bank stock in the near term.
